Appendix C: Analysis of the Provisions Relating to Supplier Liability under India's Civil Liability for Nuclear Damages Act (CLNDA)

The CLNDA as finally promulgated contains the following clause on supplier liability:

Section 17: The operator of the nuclear installation, after paying the compensation for nuclear damage in accordance with section 6, shall have a right of recourse where—

(a) Such right is expressly provided for in a contract in writing;

(b) the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services;

(c) the nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.

Sections 17(a) and (c) are in sync with the model law provided for in the CSC and other international conventions. Sub-clause (b) is the controversial portion. Under the terms of section 17(b), an operator that has paid out compensation may subsequently seek reimbursement from a supplier, whose products or services may have patent or latent defects or are substandard. The “patent or latent defects or substandard services” test is subjective. No precedent exists in the nuclear industry to guide how these standards might be applied in an Indian court. Furthermore, any given nuclear power project will have multiple suppliers. Pinning fault for a specific incident on a given component will be extremely difficult and will almost certainly result in protracted litigation.

The international nuclear community has, not surprisingly, reacted negatively to the inclusion of supplier liability in the CLNDA. However, the act contains another controversial provision:

Section 46: The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being in force, and nothing contained herein shall exempt the operator from any proceeding, which might, apart from this Act, be instituted against such operator.

According to section 46 of the act, other Indian laws that would normally apply to an industrial accident will also apply to nuclear accidents, along with the provisions of the CLNDA. This has the effect of making the supplier subject to any Indian law that applies to an industrial accident (e.g., laws covering criminal liability or damage claims under tort law).

Both these aspects of the CLNDA have caused foreign governments and suppliers significant anxiety. The concepts broached by these two sections of the act were previously unheard of in international nuclear liability jurisprudence, and countries that expended significant diplomatic capital in supporting India’s NSG exemption, such as the United States, France, and Russia, felt betrayed by their inclusion in India’s domestic law.

In order to mollify the fears of the international community (and no doubt in response to intense lobbying by supplier countries hoping to see some of the critical provisions of the CLNDA diluted), the Indian government enacted the Civil Liability for Nuclear Damage Rules, 2011. Two features of one of these rules, rule 24, are particularly salient:

1. Limitation of the Amount of Liability
   Rule 24 sub-rule 1 provides that an operator’s liability will be restricted to the extent of the operator’s liability (that is, the liability cannot exceed that which the operator itself incurs) or the value of the contract with the supplier, whichever is less.
2. Limitation of the Time Period for Liability
   Rule 24 sub-rule 2 provides that a right of recourse, as provided for in section 17 of the CLNDA, will be available to an operator only for the duration of the initial license issued under India’s Atomic Energy (Radiation Protection) Rules, 2004 (about five years), or the product liability period negotiated between the supplier and operator, whichever is longer.

At first glance the Civil Liability for Nuclear Damage Rules, 2011, appears to have provided some relief to suppliers in limiting both the amount of liability to which they may be subject and the time period during which a supplied product is under CLNDA scrutiny. However, several ambiguities remain. The rules, for example, make no reference to the scenario envisaged under section 17(b) (which introduced supplier liability), and they do nothing to ameliorate the controversial section 46.